Trade This $3 Stock for a 46%-81% Potential Return

We recently started a series called “Penny Stock of the Day”. These ideas are geared towards traders with an extremely high risk appetite.

Our Penny Stock of the Day is chosen by screening for stocks under $5 and then applying technical analysis on the shortlisted set of penny stocks showing unusual volume. When making these trades, please make sure to pay vigilant attention to pricing moves and have a strict stop loss in place to avoid significant losses.

Penny Stock of the Day: 3D Systems Corporation (NYSE: DDD)

Today’s penny stock pick is the 3D printing and digital manufacturing solutions company, 3D Systems Corporation (NYSE: DDD).

3D Systems Corporation operates through two segments, Healthcare Solutions and Industrial Solutions. The company offers 3D printing technologies, including stereolithography (SLA), selective laser sintering, direct metal printing, MultiJet printing, ColorJet printing, polymer extrusion, and extrusion and SLA based bioprinting. Its print materials include plastic, nylon, metal, composite, elastomeric, wax, polymeric dental materials, and biocompatible materials.

The company also provides digital design tools, such as software, scanners, and haptic devices, as well as solutions for product design, simulation, mold and die design, 3D scan-to-print, reverse engineering, production machining, metrology, and inspection and manufacturing workflows. In addition, it offers software platforms, including 3D Sprint and 3DXpert, which are metal and polymer additive manufacturing solutions; and Oqton industrial manufacturing operating system.

Further, the company provides maintenance and training services; advanced manufacturing services; software maintenance and cloud-software subscriptions; and precision healthcare solutions, such as design, planning, modeling, prototyping, manufacturing, printing, and finishing of medical and dental devices, anatomical models, and surgical guides and tools. It serves companies, and small and midsize businesses in the medical, dental, automotive, aerospace, durable goods, government, defense, technology, jewelry, electronic, education, consumer goods, energy, biotechnology, and other industries through direct sales force, channel partners, and appointed distributors.

Website:  https://www.3dsystems.com/

Latest 10-K report:  https://d18rn0p25nwr6d.cloudfront.net/CIK-0000910638/cb4659bb-6e3c-413a-aac7-de23f3bc0787.pdf

Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analyst offering 12-month price targets for DDD in the last 3 months, the stock has an average price target of $2.50.

Potential Catalysts / Reasons for the Hype:

• The company recently received a $7.65 million U.S. Air Force award for advanced metal 3D printing systems, focusing on high-speed flight applications through 2027.
• The FDA clearances, such as for TOTAL ANKLE Patient-Matched Guides (with Smith+Nephew) and nerve repair solutions (with TISSIUM), position DDD in the growing orthopedic market.
• The company is collaborating with NASA/Penn State for research in titanium/nitinol.

On analyzing the company’s stock charts, there seem to be multiple bullish indications…

Bullish Indications

#1 Falling Wedge Pattern Breakout: The daily chart shows that the stock has been forming a falling wedge pattern for the past several months. These are marked as purple color lines. It has typically taken support at the bottom of the wedge before bouncing back. The stock has currently broken out from the falling wedge pattern with high volume. Once the stock breaks out of the falling wedge pattern, it could move higher.

#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line is above the -DI line, and the ADX line is currently moving higher from below the +DI and -DI lines.

#3 Price above MAs: The stock is currently above its 50-day as well as 200-day SMA, indicating that the bulls have currently gained control.

#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.

#5 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a pink dotted line. This looks like a good area for the stock to move higher.

#6 MACD above Signal Line: In the weekly chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.

Recommended Trade (based on the charts)

Buy Levels: If you want to get in on this trade, the ideal buy level for DDD is above the price of $2.60.

Target Prices: Our first target is $3.80. If it closes above that level, the second target price is $4.70.

Stop Loss: To limit risk, place a stop loss at $1.90. Note that the stop loss is on a closing basis.

Our target potential upside is 46% to 81%.

For a risk of $0.70, our first target reward is $1.20, and the second target reward is $2.10. This is a nearly 1:2 and 1:3 risk-reward trade.

In other words, this trade offers 2x to 3x more potential upside than downside.

Potential Risks / Red Flags:

1. The company has a history of net losses.
   

   DDD – Consolidated Statements of Operations

2. The ongoing global uncertainties, including inflation, tariffs, and weakened customer capital spending have resulted in delayed deals and reduced demand for hardware.
3. Hedge Funds Decreased Holdings by 3.0M Shares Last Quarter.
   

   Hedge Funds | Source: TipRanks.com

4. The company faces stiff competition from the likes of Stratasys and Nano Dimension.
5. The company has ongoing litigation. This includes a consolidated putative stockholder class action lawsuit pending in the United States District Court for the Eastern District of New York. The action is styled In re 3D Systems Securities Litigation, No. 1:21-cv-01920-NGG-TAM (E.D.N.Y.). The company was also named as a nominal defendant and certain of its current and former executive officers and directors were named as defendants in derivative lawsuits pending in the United States District Court for the Eastern District of New York and the South Carolina Court of Common Pleas for the 16th Circuit, York County, and the Supreme Court of the State of New York, Kings County.
6. Despite being a loss-making company, the executives are being paid significant compensation.
   

   DDD – Executive Compensation

7. On April 15, 2022, the Company was informed that the SEC is conducting a formal investigation of the Company related to, among other things, the allegations in the Securities Class Action.

As you can see, today’s featured penny stock offers big upside potential… but it also comes with a number of risks and red flags. As always, when dealing with penny stocks, we advise caution before entering into such high-risk ventures. Remember to think before you trade… understand the risks… and if you decide to trade, stick to your stop-losses!

Happy Trading!

Trades of the Day Research Team

READ BEFORE TRADING PENNY STOCKS: The allure of penny stocks lies in their potential to deliver massive gains in a short period of time. However, in exchange for that opportunity, most penny stocks carry tremendous risk. They can be extremely volatile and are susceptible to “pump and dump” schemes and fraud.

Unlike regular stocks, the financial condition of most penny stock companies can be extremely difficult to analyze, as the majority of such stocks are traded on over-the-counter (OTC) exchanges, which are typically less transparent and less regulated than the major exchanges. In fact, in the penny stock space, it’s often easier to spot warning signs and red flags than it is to identify a sound investment. Nevertheless, we do our best to identify short-term trade opportunities in this exciting space because we know some of our readers are looking for high-risk, high-reward ideas. We just urge you to make sure you fully understand the risks before making any of these trades.

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